If you recently welcomed a new child into your home through birth or adoption, congratulations! Parenthood represents a life-changing event, full of ups and downs. As you deal with all these changes, the last thing on your mind likely is your need for an estate plan. Kiplinger, however, advises that new parenthood is precisely the time when you should establish or update an estate plan that takes your new addition into consideration.
For instance, should you and your spouse die together in a tragic accident or other catastrophic event before your child(ren) reach the age of majority, who do you want to care for them? Making your Last Will and Testament can solve this potential dilemma. In addition to specifically naming your heirs, you can also specify who you want to finish raising your child(ren) if neither you nor your spouse can do so.
But a will is only the foundation document of a good estate plan. You also need to make provision for the funds your child(ren) will need during his, her or their growing-up years. Setting up a revocable trust can be a good solution here. You can name your child(ren) as beneficiary or beneficiaries and you can also appoint yourself as the trustee. In this way you can continue to control the assets you place in the trust. The beauty, however, is the fact that the trust now owns the assets, not you personally. Consequently, if you die prematurely, not only will the trust assets avoid probate, your child(ren) can immediately reap the benefits of the income those assets produce.
You need to make sure to appoint a successor trustee to manage the assets for your child(ren)’s benefit. Remember that children below the age of majority cannot own property in their own right. Your successor trustee, therefore, may need to manage the trust for several years.